We need to widen our Asia focus

The other day (24 July) Peter Hartcher, the Sydney MorningHerald's international editor, wrote an interesting Opinion piece on 'Undoing ties that bind us to China', arguing that Australia should look to fast growing markets such as India and Indonesia to lessen our trade dependence on China. This is an issue of considerable significance for Australia and warrants serious thought.

As Hartcher pointed out, India offers tremendous market opportunity for Australia, but has to date largely slipped under the radar. The increasing flow of Indian students (and their tertiary fees) to Australian universities is an obvious exception to this, but by and large the economic relationship between the two countries is weak.

The potential for vastly expanding the ties is alluded to by Hartcher with reference to the recently released Varghese report An India Economic Strategy to 2035, commissioned by the Prime Minister, Malcolm Turnbull.

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Certainly there is tremendous scope for vastly greater trade with India. For example, recent research from the U.S. Brookings Institution foresees India having more entrants into the next billion members of the global middle class than China – 380 million to 350 million – emphasising its burgeoning market consumption capacity.

The increasing urbanisation of India's population is another major structural trend that will create demand for imported products (e.g. foodstuffs) that Australia is well-placed to supply. In this regard, UN population projections released earlier this year put India's urban population growing by 416 million people between now and mid-century. The projected China urban increase over the same period is 255 million. (Urbanisation will also occur across the other countries of the Asia region with similar implications for import-based market demand.)

For Australia to capitalise on the opportunities India offers us however, 'India literacy' needs to be advanced amongst our business and political leaders, plus indeed in the general Australian population. In particular, the great internal diversity to India – demographic, cultural, social, economic, linguistic and environmental – needs to be learnt and appreciated.

While referring to India in a singular sense may be valid in terms of it being a recognised independent nation state, real understanding of India lies at the sub-national level.

For example, 22 major ('scheduled') languages and hundreds of different dialects are spoken across the country. The most widely spoken language is Hindi, which is spoken by a majority of the population in northern India. Other languages (e.g. Tamil, Telugu, and Malayalam) though predominate in the south.

Economic development similarly varies greatly between states. 2015 GDP per capita figures (in purchasing power parity terms) for instance range from over $17,000 (Int. $) in Goa and Delhi down to just over $4,000 in the central state of Madhya Pradesh and eastern state of Odisha, the latter two the equivalent of Ghana and Zambia in international GDPpc league table terms.

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Regional variations in economic base are also pronounced. Tamil Nadu, Maharishtra and Gujarat for example, stand out as the most industrialised states, information technology industries have a concentration in the south, while the Mumbai region is the country's financial hub. States like Uttar Pradesh, Punjab, West Bengal and Andhra Pradesh meanwhile are heavily agriculture oriented.

Educational levels are another diversity feature. Overall levels of achievement are disappointingly low, and spatially variable. In the 2016 Annual Status of Education Report for instance, the proportion of Class V students who can read Class II-level textbooks varied from 70.7 percent in Manipur down to 25.5 in Arunachal Pradesh, both northeastern states.

Without appreciation of the significance of this diversity any attempts to strengthen economic ties will unfortunately fail to achieve their full potential.

The need to improve our 'India literacy' however, is just part of the challenge. A wider appreciation that there is more to Asia than just China and India (and Japan and South Korea, our other current major trading partners) is also needed. While China and India between themselves are projected to provide the majority of the next billion entrants into the middle class, the Brookings Institution research estimates that a further 210 million will come from the rest of Asia.

In the Brookings estimation, Indonesia for example, will likely enter the top 10 middle-class markets by 2020, by 2030 Pakistan could have a middle-class market in excess of $1 trillion, and the Philippines middle class could spend more than Italy's. Vietnam will have similarly massively increased middle-class capacity to purchase Australian goods and services.